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Deal between Bayer and Monsanto expected this week

Boards of both companies set to meet this week.

Aaron Kirchfeld and Naomi Kresge, Bloomberg | Sep 12, 2016

Negotiations between Bayer AG and Monsanto Co. are entering the final stretch as both sides move closer to an agreement to create the world’s biggest maker of seeds and pesticides, according to people familiar with the matter.

The German company could reach a deal to acquire its U.S. competitor as early as next week, said the people, who asked not to be identified because deliberations are private. Bayer’s supervisory board is scheduled to discuss the deal on Wednesday and Monsanto’s management board is set to gather next week, the people said. Negotiations are ongoing and could still fall apart.

Bayer announced this week “advanced negotiations” and a sweetened offer of $127.50 a share, or $56 billion, as both sides seek to end more than three months of back-and-forth over price. The bid is 18% above Monsanto’s closing price on Thursday in New York and if successful, would lead to the biggest deal this year and largest ever by a German company.

Monsanto has been pushing for a price closer to $130 a share, according to people familiar with the matter. The companies are also discussing increasing the $1.5 billion break fee that Bayer would pay Monsanto if the deal doesn’t pass muster with regulators, one of the people said.

Representatives for Bayer and Monsanto declined to comment.

Monsanto shares fell 93 cents to $107.12 in New York trading at 12:20 p.m. Bayer declined 1.2% to close at 95.02 euros in Frankfurt Friday.

Bayer’s wooing of Monsanto has played out against a backdrop of a rapidly consolidating crop and seed industry, with a series of big deals threatening to leave just a few global players. China National Chemical Corp. agreed in February to acquire Syngenta AG, while DuPont Co. and Dow Chemical Co. plan to merge and then carve out a new crop-science unit.

Even at a price of $130 a share, “we believe the winner in this takeover battle, assuming the deal closes, is Bayer,” according to a Sept. 6 note from Deutsche Bank AG analyst David Begleiter. That would value Monsanto at a lower multiple than what ChemChina is paying for Syngenta, even though the U.S. firm is “a far superior agricultural asset.”

Bayer Chief Executive Officer Werner Baumann, who became CEO in May after more than 20 years with Bayer, is intent on getting the deal done despite disagreements over the price and would prefer to avoid a hostile takeover, people familiar with the matter have said.

Buying Monsanto would speed Bayer’s growth in broad-acre crop seeds such as soybeans and wheat, Liam Condon, head of the German company’s crop science unit, said in an interview on Sept. 7.

“This fast-tracks our strategy,” Condon said. “If we don’t do this, it takes us longer to get to where we want to be.”

--With assistance from Manuel Baigorri and Lydia Mulvany. To contact the reporters on this story: Aaron Kirchfeld in London at [email protected];